Oct. 21: The market made a splendid recovery with the Sensex closing up nearly 2 per cent at 20,260.58 up 388.43 points. The Nifty was up 119.40 points at 6101.50. After a slow start it zoomed when the European markets opened in the green and on news that the Coal India IPO was subscribed 14 times.
The company has received bids 8.83 billion shares and the issue is expected to mop up Rs 1.50 billion. The issue closed for subscription on Thursday but retail investors have been given upto Oct 25 to withdraw their applications. The market was worried about the IPO and the liquidity pressures but now that it has been oversubscribed 14 times there is optimism about the liquidity that could come back to the market said equity strategist Mr Rajesh Jain. There could be at least Rs 1 lakh crores by way of refunds from the subscription to the IPO which could be invested in the market.
Short covering also played a role in sending the indices soaring. “People who had shorted thinking that the market was weak and the liquidity crunch would continues ran for cover aggressively when the European markets opened up in the afternoon,” he said The Nifty could move in a range of 5950-6300 and after that it could be a run away or a collapse.
The surprise precipitation of the rally on Wednesday was due to the money waiting on the sidelines to be invested says Ambareesh Baliga of Karvy Stock Broking. People had to apply in multiples to get the shares they wanted in the Coal India Ltd IPO, so they would be getting a refund that would come to the market. On volatility in the market, he said the market is volatile because of newsflows.
It will continue until there is a correction or a cracking up. “This is a trader’s market,” says Mr Baliga “and investors should come in only for trading.”